Tax Situation Improving in Pakistan

February 10, 2014 Taxation in Pakistan

Taxes in PakistanDUBAI – Pakistan is making headway to boosting tax collections, but there is still much more room for improvement.

In a joint news conference of the finance minister of Pakistan Ishaq Dar, and Jeffrey Franks, the IMF’s mission chief to Pakistan, held on February 9th in Dubai it was announced that the national government has made enough progress in raising tax collections in order to qualify for another loan from the International Monetary Fund.

In the announcement it was noted that the government has recently undertaken a new initiative to broaden the national tax base by contacting almost 70 000 individuals who have been identified as not complying with their tax obligations.

It is expected that the ongoing efforts to improve compliance will encourage at least 100 000 people to comply with their tax obligations by the end of the current financial year.

Highlighting the positive progress made in Pakistan, Ishaq Dar pointed out that even in January 2014 alone, tax collections had risen by 26 percent compared to the same month last year.

However,Jeffrey Franks said that despite the positive results seen so far, the government of Pakistan will still need to eliminate, or at least heavily reduce, the number of tax exemptions on offer to businesses and individuals.

The newly approved loan is worth USD 550 million, and is the third tranche in the ongoing series of loans to the government from the IMF.

Pakistan currently collects only 14 percent of its GDP in taxes, and relies heavily on foreign aid, although in recent years the donations from overseas have begun to reduce.

Photo by: Simon Cunningham